On June 26, 2013, the Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA), effectively ruling that a state-sanctioned marriage is to be recognized, regardless of whether the couple is opposite sex or same sex.
This has profound tax implications, as not only are same-sex married couples afforded the same federal tax benefits going forward as those in “traditional” marriages, but also allows the amending of federal tax returns to claim refunds of taxes that would not have otherwise been paid had the marriage been recognized at the federal level.
An important caveat is that this ruling applies only to legally sanctioned same-sex marriages. States that have not legalized or recognized such marriages are not required to do so. This means that state tax returns filed in jurisdictions that do not recognize same-sex marriages continue to result in disparate treatment.
Returns can be amended within three years of the due date of the original return, including extensions. Once this window closes, there is no relief. The types of affected federal returns include:
Income Tax – It is permitted to amend returns to go from single filing to joint filing. A married couple where one spouse is the breadwinner, or where there is significant disparity in income between the spouses, should have their tax situation evaluated to determine if amending will result in a refund.
Gift Tax – Property transfers (including cash) between spouses is tax-free. But transfers to others are subject to a maximum of $13,000 per year de minimis exemption, with any excess reported on a gift tax return. A spouse in a same-sex marriage who filed a gift tax return to report a transfer to his/her spouse should review that return and amend if necessary.
Estate Tax – This type of return was the impetus for the original suit that wound up in the Supreme Court. A decedent can leave his/her spouse property completely free of estate tax, regardless of the value. Estate returns with a balance due, involving a decedent spouse in a same-sex marriage, should be reviewed for possible amendment.
For further information or to explore your options, please contact your Aronson tax professional or Larry Rubin, Aronson’s tax controversy practice lead at 301-231-6200, regarding tax issues faced by same-sex couples.